GPB Capital plans distribution from automotive sale
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3 min read . Updated: 24 Nov 2021, 06:06 PM IST - The firm entangled in fraud allegations sold 28 dealerships after settling a related dispute for $30 million
GPB Capital Holdings LLC has closed its sale of auto dealerships after settling a yearslong legal dispute tied to its acquisition of many of the same assets, paying a self-proclaimed whistleblower $30 million.
The New York private-equity firm, which faces civil fraud claims filed by the Securities and Exchange Commission, said it is working with a court-appointed monitor on a plan for a distribution of proceeds to investors. The monitor, Joseph Gardemal, a managing director of consulting firm Alvarez & Marsal Holdings LLC, declined to comment.
GPB Capital hasn’t paid promised monthly distributions since 2018, according to some investors and a lawyer representing others.
The firm has denied the SEC’s allegations.
The transaction with Group 1 Automotive Inc. last week included 28 dealerships and three collision centers, according to Group 1 in Houston. When the deal was announced in mid-September, it was valued at $880 million and included 30 dealerships, mostly in New England, and three collision centers, or repair shops. A GPB Capital spokesman referred questions about the closing to Group 1.
A Group 1 spokesman said the company is still working on acquiring a Subaru dealership in Manchester, N.H., that was part of the original deal. He said one of the other dealerships was sold to a different buyer at the request of the car maker involved.
GPB Capital acquired most of the businesses included in the sale from the family of David Rosenberg, the GPB whistleblower who settled his disputes with the firm last week, receiving the $30 million. GPB said the settlement cleared the way for the Group 1 deal to close.
The SEC case against GPB Capital as well as seven similar state proceedings are on hold pending the outcome of criminal fraud and conspiracy charges brought against firm founder David Gentile, Jeffry Schneider and Jeffrey Lash by the Justice Department earlier this year. The cases involve four GPB Capital funds for which the firm collected some $1.7 billion from around 17,000 investors partly on promises of paying 8% annual returns in what the New York Attorney General’s office described as a “Ponzi-like scheme."
All three men have pleaded not guilty to the criminal charges and denied the civil allegations. The criminal cases remain in the pretrial phase, according to court records. One state, New Jersey, has dismissed its civil action but could reinstate it later, GPB Capital said in a securities filing last week.
The auto dealerships represented the bulk of GPB Capital’s investments, based on regulatory filings. The firm has been selling dealer operations since at least 2018, when it owned 52, the filings show.
Mr. Rosenberg sold a majority stake in his family’s Prime Motor Group to GPB Capital for $235 million in 2017, plus later installment payments totaling about $23.6 million. After the sale, Mr. Rosenberg joined GPB Capital to run its car businesses but fell out with the firm’s managers over how it was operated and financed, later suing over payments he said he was owed.
Commenting on last week’s settlement, Mr. Rosenberg said he was “happy to put all this behind me."
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This story has been published from a wire agency feed without modifications to the text
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